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UK Faces Future Financial Difficulties as 56% Stop Saving or Investing During Cost of Living Crisis

Millions of people across the UK could be heading for difficulties later in life, as poor understanding and low take-up of long-term investing could put their financial security at risk; according to new research by InvestEngine, the DIY investment platform. 

As part of its new report, ‘Building a Nation of Investors‘, InvestEngine reveals that around 56 per cent of UK adults have completely stopped saving or investing amidst the cost of living crisis.

Meanwhile, 48 per cent of adults in Germany said they would rather invest their money than save – while only 33 per cent of adults in the UK took the same viewpoint. In fact, just 14 per cent of adults in the UK have a stocks and shares ISA – equivalent to 6.6 million adults.

Germans also emerged as much more likely to have knowledge of different types of investment products compared to Brits, including exchange-traded funds (ETFs), with the number of Germans making monthly contributions to ETF saving plans projected to hit 20 million by 2026.

InvestEngine also highlighted its findings which suggest a lack of financial education in the UK. Fifty-five per cent of adults surveyed in the UK, equivalent to nearly 26 million people, either disagreed or were uncertain if investing money offered better long-term returns than cash savings, despite evidence showing this to be the case.

Almost 61 per cent feel their existing education does not equip them with enough understanding of how to invest their money. Up to 68 per cent also said they had to self-teach when it came to managing their finances, with 73 per cent of middle-aged adults (those aged 35 to 54) saying they wish they’d started investing or saving at a younger age.

Calling for change
Andrew Prosser, head of investments at InvestEngine UK investing
Andrew Prosser, head of investments at InvestEngine

Andrew Prosser, head of investments at InvestEngine, explained: “Change is badly needed, both in terms of our culture towards personal finances and in the role that industry and government can play in facilitating that change.

“When it comes to growing your wealth through investing, the best route for many will be via ‘little and often’ investing through an ISA, utilising diversified and low-cost funds like ETFs.

“As the Autumn Statement approaches, we’re encouraged to see the UK government exploring ways to simplify the ISA landscape to make it easier for people to save and invest, but there needs to be further action to simplify the system and boost financial literacy.

“This will be crucial if we’re to ensure more people can achieve greater financial security later in life.”

Following its survey findings, InvestEngine is also calling for reforms for ISAs and financial education ahead of the Chancellor of the Exchequer, Jeremy Hunt, delivering his Autumn Statement on 22 November 2023.

InvestEngine has written to the Treasury calling for:

  • A single, all-purpose ISA account for both cash savings and stocks and shares, simplifying the process of moving funds into investments and avoiding confusion over managing multiple accounts.
  • Rename ISAs to ‘tax-free accountsto make clear the main benefits of using them to increase engagement.
  • Bring pensions and investments under a single ‘investing’ banner, recreating measures like those in place for pensions to encourage employers to make investing more readily available in workplace benefits, and working with the financial industry to achieve this.
  • Boost financial education from an earlier age so more people understand the benefits of long-term investing and reducing cash savings as the default for many.

Author

  • Tom joined The Fintech Times in 2022 as part of the operations team; later joining the editorial team as a journalist.

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